Bitcoin as a Storage of Value: Can it Replace Gold?
Bitcoin (BTC) is known to be a storage of value where many believe that the value of BTC is better compared to gold than fiat, where it has been referred to as ‘digital gold’. As we can see the utility of cryptocurrencies has increased over the years, and it is no surprise that their adoption rate is following suit. With that, more and more of us ponder if BTC can replace gold in the long run as the industry matures. Therefore, in this article, we will explore and evaluate the viability of this notion.
What is good storage of value? (eg. Gold)
A characteristic of a good storage of value essentially means that it will hold its initial worth without depreciating over time, which could come in any form such as commodities or assets. Gold is seen as the ultimate store of value, due to its rich history and optimal characteristics. Although the price of gold fluctuates from time to time, we can anticipate its value to appreciate over the years due to its scarcity and physical properties.
Through unfavorable economic conditions and recession, it is only natural that many of us are scrambling to seek alternate options to move away from holding fiat.
Gold vs BTC
To put things into perspective, gold has been a storage of value for thousands of years, while, BTC started trading only a couple of years ago. Therefore, as cryptocurrencies are still in their infancy, we can acknowledge that there is still a long way to go before cryptocurrencies develop and grow into something comparable.
Additionally, we should consider the barriers to entry to purchase gold is lower than purchasing a BTC. An individual that wishes to invest in gold can simply purchase it either offline from physical stores or online with financial products provided from various financial platforms there are definitely more options and availability as compared to BTC.
Evaluating BTC as a storage of value
BTC is seen by many as a digital storage of value, where they share a number of characteristics with gold that allows them to serve this function.
When we consider scarcity, we could very well see this in BTC as well due to its halving cycles and the fact that it does not have a limited supply. This, therefore suggests its deflationary nature that can be seen in gold as well. Other considerations include the nature of BTC where it is not a perishable asset. In other words, due to its decentralized nature, it is an efficient way for investors to store assets and transfer them around the world, making it a great form of digital asset storage.
However, the main idea that we have to take note of is the dramatic volatility of BTC, where it is susceptible to huge market swings. Stability has been a huge issue when considering crypto assets, where this alone makes gold superior to BTC.
All in all, although BTC possesses a few comparable characteristics with gold, there are still significant issues that will not allow it to replace gold. However, if we are taking on the context of a digital environment, it could be one of the best options out there. (Do note that these are opinions and we do not offer any financial advice.)